2008 Senate Budget Summary

The 2008 Senate Budget proposal adds well over half a billion dollars in new state debt – without any taxpayer oversight – while increasing spending by 13.2 percent in just two years. Following is a brief summary of some of the major aspects of the 2008 Senate Budget:

Increasing State Debt Without Voter Approval

• The Senate authorizes more than $660 million in new state debt through the use of Certificates of Participation (COPs). This amount tops the House Budget by roughly $120 million.
• COPs are a form of bonds that are issued by lawmakers without voter approval. Such authorization would continue an eight year trend of ignoring public input over new state debt. Since 2000, North Carolina state leaders have authorized more than $2.4 billion in new state debt – to be repaid, plus interest, by taxpayers. Not one penny of this new debt has been approved by voters.
• Making matters worse, COPs are issued at a higher interest rate than General Obligation bonds, meaning the Senate’s proposed new debt will cost an additional $30 million or more to finance than G.O. bonds.
• The Civitas Institute’s May 2008 DecisionMaker poll shows that 77 percent of voters think the General Assembly should not be allowed to borrow money without voter approval.

Spending Increase

• The FY 2008-09 Senate Budget would appropriate a total of $21.4 billion in General Fund operations. This amount would be $706.8 million more than last year’s budget, an increase of 3.4 percent.
• For the two-year budget cycle, this budget would mark a spending increase of $2.5 billion over FY 2006-07, equal to a 13.2 percent increase.

Teacher and State Employee Pay

• State employees would receive the greater of $1,100 or a 2.75 percent increase in salary.
• Teachers would receive an average salary increase of 3 percent, with the potential for more if state revenues exceed expectations in the coming fiscal year. If a revenue surplus does materialize, a maximum of $200 million could go to finance additional teacher pay raises.

Tax Changes

• The Senate budget approves roughly $50 million in tax cuts and credits, but doesn’t specify which taxes would be cut. The bill merely establishes a “reserve for tax relief.”
• In contrast to the House Budget, there is no provision to increase the state Earned Income Tax Credit in the Senate’s proposal.
• Like the House Budget, the Senate does not include the cigarette and alcohol tax increases proposed by Governor Easley.

More at Four

• This largely unproven program would receive an additional $41 million in the Senate budget. The expansion would bring total funding for the program to more than $180 million. The pre-kindergarten program has received little scrutiny, with mixed results at best.
• On the bright side, an amendment was approved dictating a detailed cohort study be performed to better evaluate More at Four in future years.

Health Care

• The expected inflationary increase for Medicaid provider reimbursements would be cut by 75 percent, producing a savings of $42 million.
• N.C. Kids Care, a program designed to provide government-run and subsidized health insurance for children from families earning up to 250 percent of the federal poverty limit (FPL), will be delayed until July 2009 pending the federal government’s re-authorization of the SCHIP program. This move will save $7 million for FY 2008-09.
• N.C. Health Choice, another government insurance program for low-income children, will delay any enrollment expansion until April 2009, also pending federal action.

Highway Trust Fund Transfer

• As in the House Budget, the Senate proposes a $25 million reduction in the transfer of funds from the Highway Trust Fund to finance general operations. The transfer is currently scheduled to be roughly $172 million.
• The Senate budget calls for a more aggressive phase-out of the transfer than the House budget, however. The transfer would be reduced by another $74 million by 2011 in the Senate’s plan, compared to the House’s proposal of reducing the transfer by another $24 million by 2010.
• There is no mention of ending or reducing the $17.6 million transfer from the Highway Fund.

Wasteful Spending and Regulations

• $500,000 for a “GeoDome” in Duplin County
• $2 Million for an “Oyster Sanctuary Program”
• Requiring biodegradable water bottles be purchased by state agencies, with no cost estimates included
• $500,000 increase in funding for the North Carolina Symphony